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Tax cut plan: If it fails, average tax bill to rise $1,600

Tax cut plan in Congress calls for a one-year extension. But if Republicans, Democrats can't agree, taxes will rise, especially for wealthiest families.

J. Scott Applewhite/AP/File

In this February file photo, Senate Finance Committee Chairman Sen. Max Baucus (D) of Montana shakes hands with Rep. Fred Upton (R) of Michigan after bipartisan House and Senate conferees signed a compromise agreement on the payroll tax cut extension. But Democrats and Republicans are forcing votes in Congress this week on competing tax plans that are expected to fail.

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July 24, 2012

By Alan FramAssociated Press

WASHINGTON

A standoff with Congress that results in the January expiration of wide-ranging tax cuts would mean 114 million families would see average tax increases of $1,600 next year, the White House says.

In a report Tuesday on the tax standoff with Republicans, the White House tried putting a human face on the showdown and shifting the blame to the GOP.

"So far, the only reason the middle-class tax cuts have not been extended is that Republicans in Congress continue to insist on cutting taxes once again for the wealthiest few," the report said.

Republicans want to renew all the tax cuts for one year to give the two sides time to negotiate permanent taxchanges. President Barack Obama and Democrats also want a yearlong extension, but insist they will only extend the reductions for households earning below $250,000.

Last week Sen. Patty Murray, D-Wash., a member of her party's leadership, said if there was no deal by January, her party would be willing to let all the tax cuts expire to pressure Republicans to give ground. Republicans immediately accused Democrats of being willing to raise taxes on everyone as the price for prevailing.

"They're ready and willing to go right off the fiscal cliff if they don't get their way," Senate Minority Leader Mitch McConnell, R-Ky., said. He cited the frequently used term "fiscal cliff" to describe the economy-rattlingtax increases and spending cuts that will automatically take effect when 2013 begins unless lawmakers reach a compromise for avoiding them.

The $1,600 average tax increase is for all families earning under $250,000, White House officials said. The numbers of families from this group would range from 13.2 million in California to 200,000 in Wyoming, the report said.

The exact size of a family's tax cut would depend on its size, income and other characteristics.

A married couple earning $50,000 to $80,000 with two children would see a tax increase of $2,200, the paper said. A childless couple making $200,000, including $20,000 of capital gains income, would see their tax bill grow by $5,540.

The report did not include a figure showing the average tax increases that wealthier earners would face, but they would be substantially higher.

It included one example for a couple making $2 million in salaries and bonuses plus $500,000 from capital gains. They would get $7,080 in tax cuts under Obama's plan, which allows a tax cut to all families for the first $250,000, and $124,000 under GOP proposals, the report said.

The partisan conflict will intensify this week when the Senate votes on a Democratic plan that denies tax cutsto higher earners, and perhaps on a GOP proposal extending tax cuts for all. Both are certain to fail.